Effectiveness of EU Regional Policy: Evidence from a Natural Experiment in Finland

  • Ville Vehkasalo National Audit Office of Finland
Keywords: Regional policy, Policy analysis, Microeconometrics

Abstract

European Union regional policy is implemented through structural funds, such as the European Regional Development Fund (ERDF), which support investment in peripheral regions of the EU. We studied the effects of EU regional policy on key economic variables using a rare natural experiment setting. In 2007, parts of regions that were previously covered by the ERDF programme for Western Finland were reallocated to the ERDF programme for Northern Finland, with higher support intensity per capita. This area reallocation was caused by the newly adopted EU legislation regulating the classification of regional statistical areas. With a detailed postal code area dataset and a difference-in-differences estimator, we discovered desirable regional policy effects on unemployment and the number of jobs.

References

Abadie A. (2005): Semiparametric Difference-in-Differences Estimators. Review of Economic Studies, vol. 72, 1–19.

Becker S., Egger P. & von Ehrlich M. (2010): Going NUTS: The effect of EU Structural Funds on regional performance. Journal of Public Economics, vol. 94, 578–590.

Becker S., Egger P. & von Ehrlich M. (2012): Too much of a good thing? On the growth effects of the EU’s regional policy. European Economic Review, vol. 56, 648–668.

Becker S., Egger P. & von Ehrlich M. (2013): Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects. American Economic Journal: Economic Policy, vol. 5, 29–77.

Breidenbach P., Mitze T. & Schmidt C. M. (2016): EU Structural Funds and Regional Income Convergence – A sobering experience. Ruhr Economic Papers no. 608.

Einiö E. & Overman H. (2016): The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI. VATT Institute for Economic Research, working papers 71/2016.

Gagliardi L. & Percoco M. (2016): The impact of European Cohesion Policy in urban and rural regions. Regional Studies, forthcoming.

Le Gallo J., Dall’erba S. & Guillain R. (2011): The Local versus Global Dilemma of the Effects of Structural Funds. Growth and Change, vol. 42, p. 466–490.

Marzinotto B. (2012): The growth effects of EU cohesion policy: A meta-analysis. Bruegel Working Paper, No. 2012/14.

Meyer B. (1995): Natural and Quasi-Experiments in Economics. Journal of Business & Economic Statistics, vol. 13, no. 2, 151–161.

Mohl P. & Hagen T. (2010): Do EU structural funds promote regional growth? New evidence from various panel data approaches. Regional Science and Urban Economics, vol. 40, 353–365.

Ottaviano G. & Thisse J.-F. (2004): Agglomeration and economic geography. In Henderson V. & Thisse J.-F. (eds.): Handbook of Regional and Urban Economics, vol. IV, ch. 58. Elsevier, Amsterdam.

Pellegrini G., Terribile F., Tarola O., Muccigrosso T. & Busillo F. (2013): Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach. Papers in Regional Science, vol. 92, 217–233.

Percoco M. (2016): Impact of European Cohesion Policy on regional growth: does local economic structure matter? Regional Studies, forthcoming.

Wooldridge J. M. (2010): Econometric Analysis of Cross Section and Panel Data. 2nd edition. MIT Press, Cambridge.
Published
2018-07-02
How to Cite
Vehkasalo, V. (2018) “Effectiveness of EU Regional Policy: Evidence from a Natural Experiment in Finland”, REGION, 5(3), pp. 1-19. doi: https://doi.org/10.18335/region.v5i3.195.
Section
Articles